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Today on The Startup Chat, Steli and Hiten talk about replacing yourself as CEO or the founder of your startup.

One of the hardest decision a founder can ever make is deciding when it is time to hand the wheel to someone else. Why it may seem like something that needs to be done, it’s also something that Hiten recommends you don’t do as it can limit the success of the company amongst other things.

In this week’s episode, Steli and Hiten share their thoughts on why you shouldn’t replace yourself at your company, how to do this the right way if it’s something that has to be done and much more.

Time Stamped Show Notes:

00:32 About today’s topic

00:47 Why you should replace yourself as the founder of your company.

01:36 Another reason why you shouldn’t do this.

01:55 How replacing yourself reduces the chances of your company succeeding.

04:16 An example of an exception when it comes to replacing yourself.

04:43 The best way to do this.

05:38 Why it is better to promote someone in the company.

06:06 How your customer feels about changes to the CEO position.

07:30 Why a founder might want to do this.

3 Key Points:

Your chances of success once you replace yourself go down tremendously

You don’t replace yourself as a founder, you are a founder for life.

Your business still has to run.

[0:00:00]

Steli: … Boom. Hey, everybody, this is Steli Efti.

[0:00:03]

Hiten: And this is Hiten Shah. Today we’re going to talk about one of my favorite topics. I’m just kidding. I’ve been through it and it sucks. The topic is replacing yourself as CEO or founder. First thing I’ll say is you don’t replace yourself as founder. You’re a founder for life. Sorry.

[0:00:19]

Steli: Fair.

[0:00:20]

Hiten: But I want to say it because you might not be the CEO and you might try to replace yourself. So my reaction to this was very personal, and my reaction to this was, “Don’t do it.” And I’m going to say why real quick and then, Steli I’m sure you’ll have some thoughts. So I went through this at my company, KISSmetrics. We had just gotten through a major lawsuit after a couple of years. We had an independent board member who was in the company and we were basically considering making him CEO and we decided to do it. And, honestly, it was the worst decision I every made about a company. I was actually amicable about it. I think there were things about, ironically, sales, that I wanted to learn, and I thought this gentleman running the company as CEO would be able to help me learn those things. I was dead wrong. Nothing wrong with him. It just wasn’t a good fit for our company, and I think people wanted a change. And the thing is, I never got to run the company and grow the company. I had to watch someone else try to do it. That’s why I’m bringing baggage to this conversation. I rarely do, but in this case I am. The other baggage I’m bringing is when I went through this I asked many people. I asked probably like a dozen different CEOs and founders who have done this themselves and replaced themselves, and they all said, “Don’t do it.”

[0:01:48]

Steli: Interesting.

[0:01:49]

Hiten: So …

[0:01:50]

Steli: Go ahead, go ahead.

[0:01:52]

Hiten: No, no. Go ahead.

[0:01:53]

Steli: No I was like, first of all I love your honesty about this and it’s great to find a topic once in a while that gets you riled up, right? Some kind of a personal experience that gets your blood boiling.

[0:02:05]

Hiten: It’s worse. Steli, it’s worse. I went in there again, for six months after, I don’t know, two years. I was still at the company but … Actually, I don’t remember if I was still at the company. But I went in there for six months and I switched out one CEO to another. So I became interim CEO for six months and I did my best to bring in a new CEO. I also had a gentleman there, an executive, that I wanted to fire, that the board would not let me. And so it’s personal. And it’s personal to me because I didn’t just leave the company, I came back and tried to help out again. And help out, though, to replace myself again. So I replaced myself twice. And I think it was just terrible. Here’s the thing. And I might be too blunt about this, but your chances of success as a company, once you get replaced, or replace yourself as CEO, goes down tremendously. And the reason is, what got you here as a founder, is more likely to get you to the next place you need to go as a business, than if someone else is running it. And a lot of things have to change. The team has to change, the culture has to change. The people is the biggest program. And I’m not saying that there’s CEOs out there, or any of the CEOs are bad. But what happens is you’re taking over from the founder. A founder has essentially ingrained their whole DNA across the company. No matter how cool you are as a CEO, that’s a very hard thing to deal with. So it takes a very special person in the first place to want to do it, in my opinion. And then that person has to make it their company. And the founders tend to get in the way. I got in the way. I got in the way the first time. The second time, the second I knew I was going to get in the way, I left. I was just like, “Cool. I’m out.” I tried to help the new CEO once I was interim and, after a while, it just didn’t make sense any more. And you can call it my ego, you can call it my arrogance, I don’t really care. At the end of the day what you see inside a company is that massive change needs to happen when you bring on a new CEO. And it doesn’t matter what size you are. You can be 10 people, or you could be a thousand people. This is something that’s not very easy to do because the people who work at the company, are working there because of the leadership. And stories like the Google story of Eric Schmidt taking over for a while and then the two founders coming back and taking over later, that’s okay. It happens. And it’s the exception, not the rule. I think the rule in this one is it’s a very difficult transition to do. If you’re hell bent on doing it, the biggest thing you need to think through is what is your involvement going to be after, and how do you support that CEO 100%, because that’s all you’ve got. You have to support the person in their decisions and not get in the way and all of us as founders have a tendency to get in the way. So the way to do this the best is transition yourself out of the company as fast as possible, if you really feel the need to replace yourself. Because then the other person has the most opportunity to go make it their company. Again, there are exceptions. Steve Jobs didn’t make this work. But the Google founders did make it work. And I don’t really know why … I know why the Steve Jobs one failed. I don’t really know why the Google one worked. And I don’t think we’re ever going to know. And I think it’s because it’s a rarity for that move to work. This is why you see a CEO come in, and then a CEO leave. And another one come in. Now you’re in the CEO shuffle. That being said. That being said, sometimes when there’s a problem with the founder, like the founder, god forbid, has a terminal disease, passes away, or all kinds of things like that, it is always better, if you can, to promote someone in the company. Always. So that is a little bit of an exception, and obviously dire circumstances. And another way to look at it is that if those situations happen, the company is usually ready to rally around whoever the new person is, whether they’re internal or external. But internal people tend to have better clout and a faster ramp up to that kind of change because they’re already familiar with the company. And I’ll say one last thing, because this is a trend with us, but your customer doesn’t give a shit that the CEO has changed. And that’s a very important thing. And what I mean by that is, year business still has to run. And that’s easy to forget when you’re going through whatever turmoil you are, because you don’t want to be CEO anymore. Or someone’s trying to kick you out of the company, or there’s someone better for the job, maybe, or you think so. There’s an unlimited amount of reasons you might consider replacing yourself or someone else, like your board or your investors, but at the end of the day, it’s not one of the hardest things to do. It’s the thing that you want to actually actively avoid. And the way to avoid this is actually, as you become a founder, go talk to founders, founder CEOs, that are a few steps ahead of you. I know you love that, Steli, in a bunch of cases. I think that it’s a great strategy in this case, especially. And go really figure out what you’re going to need to turn into. And really think through do you want to be that person or not?

[0:07:39]

Steli: I love it. Such good advice. I don’t really want to ruin by adding anything more. It’s like-

[0:07:45]

Hiten: You’ll never ruin it.

[0:07:48]

Steli: One thing that I’ll touch on, to just wrap up this episode is that I think sometimes founders, especially when they’ve been running their company maybe for a while, especially if it’s not exploding from success to success but maybe has tapered off a little bit, eventually some founders, I’ll find, get into this phase where they’re like, “Oh, this is not a stable business, I’m not sure I’m the right person to run it.” Or a lot of their job has become something they don’t like doing anymore. So then they start fantasizing about, “What if I just brought in amazing leadership. They take over, I’m just on the board, and I can just go and start something new that’s small and in the beginning stages.” That’s kind of I think a very common entrepreneurial fantasy. Like, “Oh, my god, it would be cool if I can bring in a new dad into this family. Go start a new … Start dating again and find a new family to start.” But there’s a lot of risk and a lot of this is more fantasy and more fiction than reality, in terms of how smooth and how beautiful all this will be. But also one thing that’ll come up is that sometimes you can just sit down and ask yourself, what do you not like anymore about running the company? And is this massive radical shift really the only solution? Maybe bring in a COO to help with a lot of the things that you don’t like doing anymore as the CEO, is the right and perfect solution to make you happier, more productive, more successful, the company better, and everything. It’s a much easier thing to add leadership and share responsibilities and give somebody responsibilities you’re not that great at and you don’t enjoy versus basically leaving the position and leaving the company as an operational leader or manager and trying to replace leadership at the highest level in the company. That’s such an incredibly hard thing to pull off that most people, most companies, won’t survive that procedure. So that’s it from us for this episode. That level of change is hard. You know, I might actually want to hear from people that are thinking about this, or have gone through this, or are going through this. If you’re listening to the Startup TED, you’re thinking about bringing in somebody to run the company, or you’ve done it or you’re doing it, please reach out. Steli@close.io, hnshah@Gmail.com. Let us know how things are going with thoughts you have. I want to learn more about this but I want to hear from people that are going through this and see if we can be even more helpful in specific cases. And, with that being said, we’ll hear you very soon.

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Steli Efti is the co-founder and CEO of Close. He’s Silicon Valley’s most prominent sales hustler, a YC alumni, advisor to several startups and entrepreneurs and the author of The Ultimate Startup Guide To Outbound Sales.